By Sharon Cho and Alex Longley
Oil has rallied this year amid output cuts from Saudi Arabia and OPEC+, and an improving demand outlook with the rollout of Covid-19 vaccines. Prompt timespreads have firmed in a bullish backwardation structure, helping to unwind bloated inventories built up during the coronavirus pandemic, while investment banks continue to raise their crude price forecasts.
The assault on the Saudi terminal appears to have had no impact on shipments, but it’s the latest in a series of incidents amid a rapidly tightening market. U.S. refineries, meanwhile, are resuming operations after the unprecedented cold blast last month and should start consuming more crude, and gasoline demand in California — the biggest American state — is picking up.
“Risk appetite across the commodity space, including oil, look set to ebb and flow with dollar and yield developments,” said Ole Hansen, head of commodities strategy at Saxo Bank.
The rally in oil prices is bad for big consumers like India, according to an executive at one of the nation’s biggest refiners. The country would prefer prices to be in the lower end of the $50-$60 a barrel range.
U.S. gasoline and distillate stockpiles — a category that includes diesel — declined last week, according to the median estimate in a Bloomberg survey before government data on Wednesday. Crude inventories, however, expanded for a third week, the poll shows.
“I wouldn’t rule out some more pullback,” said Vandana Hari, the founder of Vanda Insights in Singapore. “A settlement above $69 for Brent, even after the surprising OPEC+ decision, seemed like an over-reaction.”
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